The Luxembourg SARL-S (Société à Responsabilité Limitée Simplifiée), is a simplified form of the Société à Responsabilité Limitée (SARL).
Due to its simplified incorporation process, flexible management structure, limited liability, tax advantages, and several other benefits, it is one of the most popular business structures in Luxembourg, for entrepreneurs.
The Luxembourg SARL-S
The SARL-S
The SARL-S (Simplified Limited Liability Company), is a unique form of commercial entity governed by regulations that vary moderately from those governing a traditional private limited liability company (SARL). The SARL-S serves as a valuable platform for first-time entrepreneurs, enabling them to promptly initiate their business activities in Luxembourg.
An important characteristic of the SARL-S is its ability to reduce certain obligations typically associated with establishing a SARL, particularly for entrepreneurs.
Notably, the SARL-S required only EUR 1 as the minimum share capital required, which significantly reduce the financial burden. Also, this company structure can be established through a private deed, eliminating the need for a notary. And it can be established for either a limited or unlimited duration.
The Luxembourg SARL-S: Who is Eligible
SARL-S formation is exclusive to individuals, restricting its establishment to natural persons.
An individual cannot hold shares in more than one SARL-S at once, except in the event of inheriting shares following the death of another shareholder. However, it is acceptable for an individual to hold shares in a SARL-S and also in a different company with a different legal structure.
Similar to conventional SARL, a SARL-S can include between 1 and 100 shareholders.
Requirements
The establishment of a simplified limited liability company, SARL-S, is reserved for craftsmen, traders, manufacturers, and certain liberal professionals. And during the establishment, the company’s purpose must be stated in its deed of incorporation.
Any individual who wants to form a SARL-S must first apply for a business permit from the Ministry of the Economy. This permit is a requirement for registering the company with the Trade and Companies Register (Registre de commerce et des sociétés – RCS).
Costs
Establishing a SARL-S involves various costs, which include:
- The cost of publishing the company’s information in the Trade and Companies Register (RCS).
- A share capital of at least EUR 1
- Potential costs associated with obtaining administrative authorizations.
The Luxembourg SARL-S: Process Guidelines
Deed of incorporation
The formation of a SARL-S can be done through a private deed, eliminating the need for notarization.
Company name
The SARL-S must adopt a unique company name, which should be specified in the deed of incorporation. To verify name availability, it is advisable to contact the RCS (Trade and Companies Register).
Also, the company name, followed by the designation “SARL-S,” must be included on all official company documents.
Conversion
If the number of shareholders exceeds 100, the SARL-S has a one-year window to convert into a different legal form.
Additionally, if the share capital surpasses EUR 12,000, a change in legal form becomes necessary.
The decision to undertake a legal form conversion is made during a shareholders’ meeting.
Capital
The share capital of a SARL-S must be at least EUR 1 and should not exceed EUR 12,000. This capital must also be fully subscribed and paid at the time of the company’s formation.
Contributions made by the shareholders can be in the form of cash or in kind.
Share Type
Shares issued by a SARL-S are categorized as registered shares. These shares cannot be treated as negotiable securities; instead, they are exclusively issued as registered share certificates, held by registered shareholders.
Private bond issuances are allowed, subject to the shareholders’ consent in the case of convertible bonds.
Dissolution
The dissolution of a SARL-S can occur under the following circumstances:
- Expiration of the company’s designated duration.
- Achievement of its business purpose or the termination of its objectives.
- Judicial decision to dissolve the company for valid reasons.
- Voluntary dissolution determined by either the single shareholder or all shareholders during a shareholders’ meeting.
Unless stated otherwise in its articles of association, the occurrence of events such as the death, disqualification, bankruptcy, or insolvency of a shareholder does not automatically dissolve the SARL-S.
In the case of voluntary dissolution, any documentation confirming the dissolution must be accompanied by certain administrative certificates.
The Luxembourg SARL-S: Structure of Managerial Bodies
The organizational structure of a SARL-S involves the following:
- Managers:
A SARL-S is governed by one or more managers, who may or may not be shareholders. These managers are appointed by the shareholders, either through the articles of association or in a general meeting of shareholders, for a specified term. The shareholders’ assembly represents the company’s capital and makes all decisions concerning its operations.
- Responsibilities of the Manager:
Except for matters requiring shareholder decisions as mandated by law or the articles of association, the manager(s) have the authority to take necessary actions to achieve the company’s objectives. They can delegate the day-to-day management and representational responsibilities to other managers, directors, or representatives, whether shareholders or not, acting individually or jointly. The actions of the managers bind the company, even if they exceed the scope of the company’s objectives.
- Meeting of Shareholders:
Shareholder decisions are made during general meetings of shareholders, where matters such as:
- amendments to the articles of association,
- liquidation of the company,
- legal form,
- changes in the company name,
- appointment or dismissal of managers, or
- changes in nationality are decided.
Shareholders can participate in decision-making and may enter into agreements regarding voting rights. Each shareholder’s voting power is determined by the number of shares they hold, and decisions are valid with a majority representing 50% of the capital.
In SARL-Ss with a sole shareholder, the shareholder possesses the authority vested in the general meeting of shareholders.
- Liability:
The founders and managers (in case of a capital increase) are jointly responsible for:
- any unpaid capital,
- the difference between the minimum required capital and the actual amount subscribed,
- complete payment of shares,
- and any damages resulting from the company’s invalidity or errors in the incorporation document.
However, the articles of incorporation can restrict “founder” to subscribers holding at least one-third of the share capital, with other shareholders considered as ordinary subscribers. Shareholders are liable up to the extent of their contributions to the share capital.
The Luxembourg SARL-S: Obligations
- Legal Publications:
Registration with the Luxembourg Trade and Companies Register (RCS) is a requirement for a SARL-S. During the registration process, the company must provide essential information, such as the company or trade name, legal form, registered office address, company purpose, and share capital amount.
Also, the SARL-S must disclose the identities of its shareholders, along with their addresses and the number of shares they hold, as well as its business permit number. Any subsequent changes must be filed with the RCS and published in the RESA (the Luxembourg official gazette).
Additionally, financial statements of the SARL-S, including a balance sheet, profit and loss statement with annexes, and a management report, must be filed with the RCS within seven months after the end of the financial year.
- Accounting:
A SARL-S is required to prepare a balance sheet, a profit and loss statement with annexes, and a management report. However, if the company does not exceed certain thresholds, it may produce a short-form balance sheet.
- Taxation:
The SARL-S benefits from Luxembourg’s favorable tax regime, including its extensive network of double taxation treaties.
SARL-Ss in Luxembourg are subject to various fees and taxes, including a fixed registration fee, property tax, business tax, net wealth tax, corporate income tax, and value-added tax (VAT).
And in addition to its tax benefits, it offers various tax planning opportunities for businesses operating internationally.
Note that certain requirements and regulations may apply to the SARL-S, and it is advisable to consult with professionals for detailed guidance based on your particular circumstances. Please contact your Damalion expert now.
